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Originally Posted by PKFFW
What MS does have the right to do, is ban access to Xbox live if the Xbox owner breaks the terms of the agreement under which Xbox live operates.
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Is that all they're doing though? I don't know if it's accurate, but I saw this in another discussion...
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When an Xbox 360 console is banned, there are offline features that are disabled too - the most significant are playing games from the hard disk, and using the console as a Windows Media Center Extender. Once banned, the console will corrupt the saves on memory cards and hard disks that it comes into contact with so that they can't be used on a non-banned console without re-downloading them from Live.
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If that's true, then they're definitely taking away a lot more rights than are probably spelled out in the terms of agreement. I doubt users agreed to the above terms as consequences for modding.